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Will Trump's Triumph Trim Taxes? What You Should Know Now 

by Warren Racusin

Published: November, 2016

Submission: December, 2016

 



The election of Donald J. Trump as the 45th president of the United States is likely to bring significant shifts in economic and social policy for the country, including major changes in federal tax policy.It is far too early to tell what will occur during the Trump administration. We have not yet seen specific legislative proposals. However, we think now is a good time to advise you about some of the general concepts the presidentelect has endorsed and to suggest steps you should consider now to address those potential changes. Many tried-and-true strategies are even more important this year because of the president-elect’s tax agenda. His website sets out proposals for, among other things, reducing income tax rates on individuals and businesses, eliminating the alternative minimum tax, and jettisoning the 3.8 percent net investment income tax (which may be repealed as part of the reform or repeal of the Affordable Care Act – aka, “Obamacare”).While this is not a comprehensive list, here are tax-planning strategies you should consider in anticipation of changes to come next year:Defer Income To the extent possible, push taxable income into 2017, when it will probably be taxed at lower rates. For example, defer bonuses, consulting, and self-employment income. Should you defer selling assets and realizing capital gains until next year? That’s a closer question. You should talk about that with your investment and tax advisors – the timing of sales should be driven primarily by investment considerations, although taxes are part of the equation.Accelerate Deductions It’s particularly important to consider maximizing itemized deductions in 2016 – for example, pay state income taxes and real property taxes before year-end. That’s because Mr. Trump’s proposals include allowing taxpayers to take only $200,000 of itemized deductions in any one year. Further, deductions are worth more when tax rates are higher. Also, even under current law, many itemized deductions can be used only if they exceed certain minimums. So, bunch itemized deductions into 2016 to exceed those floors.

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